Be careful what you wish for
Another year – and more of the same.
The received wisdom among UK politicians, the consumer press, analysts, regulators and the vendor community is that 1: there is inadequate competition in UK retail banking; 2: current account switching rates remain stubbornly low: 3 what we need is more new banking start-ups and 4: to encourage this, the barriers to entry for new players ought to be reduced.
A glance at a random page from, say the money pages of The Daily Mail, would lead you to believe that the UK punter is seriously under-served by greedy UK banks and that we all pay more than we should for our everyday banking.
It’s pure bunkum but no matter.
The simplistic argument advanced is that with more banks in the market place, competition will increase and the consumer will be the ultimate winner.
I may well be in a minority of one on this but no matter.
In the past five years, current accounts have been launched by, inter alia: Metro Bank, Tesco Bank, Marks and Spencer and Virgin Money.
This year new accounts will come onto the market from the likes of Atom and German digital bank Fidor Bank.
Almost uniquely in the UK, the majority of current account customers (almost 80% of customers) enjoy ‘free-in-credit’ current accounts.
It is a fact rarely reported by the UK consumer press that by international comparison, the UK current account customer is incredibly well served.
And just who are the banks that want to see an end to general free in credit current accounts? Which banks have been mumping and moaning to the CMA about the perceived unfairness of the current account market: step forward a number of the new players.
The CMA is investigating the supply of personal current accounts (PCAs) and of banking services to small and medium-sized enterprises (SMEs).
In the second quarter of this year, it will publish what it calls ‘working papers and annotated issues statement’ and in June/July will host hearings with the UK banks.
It has set a deadline of the end of July for all parties’ responses before provisional findings are published in September.
The CMA’s final report will not be published until next April.
Just to be clear and for the avoidance of doubt: the existence of the start-ups will being much needed energy and even possibly some excitement to the market.
There are a number of seriously talented execs with stellar track records involved in a number of the new entrants.
Segments of the market previously under-served – for example Lintel targeting migrants and Hampden targeting the private banking market via digital – will benefit.
If however the net result of new start-ups is to transition the UK market towards a Continental or US model where free-in-credit checking is the exception, you can confidently forecast that the screams from readers of the Mail money pages will be among the loudest.